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Sorry, I lost track of this thread .. >> Imagine Australia has tariff of 15 per cent on machine tools and imports all
>> such tools from Asia - which can produce such tools more cheaply than the
>> US. Then, the government strikes a free-trade deal with the US. US
>> manufacturers now find that it is profitable to sell tools on the Australian
>> market, as there costs are only 14 per cent higher than the Asians. This allows
>> them to price just under the prices that the Asians charge in Australia and
>> take all the market. The result? Effectively no change to the price of machine
>> tools in Australia, but a loss of the tariff revenue that the government used
>> to collect, which now goes to the Americans. Thus we have a net loss to
>> Australia from trade diversion. Right - and Australians couldn't possibly do this back to the Americans because
everyone knows that Australians are fundamentally more stupid and incapable
than Americans who all carry the exploitative capitalist gene. You can always create little niches of people who are worse off under any
change to legislation (10 goat-farmers in Somalia can't compete with imports
which prevent 100,000 starvations per year, therefore trade is bad etc etc). I'm a little sick of being told "It's for your own good that we
stop you from freely trading with X". >> Likewise your argument that the country doesn't lose revenue, only the
>> government, is also wrong. The tariff revenue that the Australian government
>> used to get now goes to the Americans. Unless you think money obtained by the
>> government has a zero value to Australians, then Australia is clearly worse
>> off. Actually I do think that the marginal value of government revenue is very close
to zero. Tell me - if the government got a windfall of an extra billion dollars
next year, where do you think it would go? I think it would mostly be used to entrench several hundred thousand of my
fellow Australians in the welfare poverty trap. The benefits from the small
amounts which which would be spent on useful infrastructure may well be less
than these costs. As long as the government can afford to pay some petty bureaucrat to come
around and tell me whether I can cut down a tree in my own yard, I will
try to minimize government revenue. That ain't money well spent.
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